Monday, June 21, 2010

CS In Oregon Needs Guidance

GOT QUESTIONS?

Hello,

I'm looking for some guidance in regards to doing a strategic default or not. Live in Bend Oregon (one of the most inflated housing markets in the US before the crash). Purchased our single family residence in May 08 for 375,000, 20% down. Balance on our first is $293,000, no second or LOC. Current estimates of the property is 200-225K. Prices appears to still be falling, but at a much lower rate than they were. I've spoken with a real estate attorney who says Oregon is a non-recourse state and we would not have any tax implications with doing a default.

Looking at the prospect of being able to live in the house for 12-18 months rent free would allow us to pocket nearly $25,000, good seed money towards the purchase of a new house in 5 years when we would be eligible for a new loan.

Appreciate the website, great resource!

GET ANSWERS…

Thanks for reaching out and thank you for your kind words.

It is generally true. You can rebuild your credit over time.

If your attorney is correct about you not having any tax implications or recourse implications in your home state of Oregon then there appears to be little risk of any deficiency judgment or forgiveness of debt. You should ask your attorney if the lender has the option of foregoing a foreclosure action in favor of pursuing a legal action for a personal money judgment for the money loaned to purchase the home.

The key question is can you live in your property for up to 12 to 18 months. You should speak to your attorney about what it will take to achieve this and what it will cost to defend a foreclosure action and other creditor actions.

We advocate the use of strategic default if it fits a person’s unique set of circumstances. The primary purpose of a strategic default are cash flow protection, wealth preservation and savings preservation. It is our belief that it does not make economic sense to put money into a worthless asset that has little chance of gaining value. Furthermore, you can invest the money into better uses and, if need be, have a cushion to pay any creditor.

Remember, the decision to strategically default can take days or weeks. It takes months or years for the full implementation of it. Be prepared for your lender’s collection efforts. It can take all forms, including calls, letters, and perhaps a visit. Your attorney will tell you that a lender must follow the law regarding all collection efforts.

Focus on what you want to achieve. Make sure to weight the benefits and the risks. In the end, if the benefits outweigh the risks then you should strongly consider a strategic default.